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Growing appetite, limited opportunities

20 September 2017

The last decade has been difficult for transport infrastructure providers. After years of reliable growth, motorway traffic fell or remained static, after the 2008 financial crisis. Traffic through airports, railways and even ferries also suffered.

However, it seems that across Europe the market has stabilised, and we are again seeing progressive traffic recovery and growth. In response, there is a growing appetite for investment in the sector through new PPP schemes, and specially through secondary sales/acquisitions and refinancing.

Through our many projects in this field, Steer Davies Gleave has been able to build a picture of traffic development over the last years across Europe and worldwide. We can see that, in part reflecting the socioeconomic performance of each country, motorway traffic in Germany, France and the UK was only marginally affected by the turbulence of the 2008 economic crash and its consequences, and we have seen steady growth in these markets from 2012. In Spain and in Italy, the impact of the crisis was much more dramatic. Here too, however, traffic begun to recover from 2012 onwards.

In 2016, we have finally seen accelerated growth across almost all the transport assets we have reviewed, and backed by robust data and forecasting we believe that this trend will continue in the medium term. Slow but sustained economic growth across the EU economies will lead to growth in traffic levels, although shocks from Brexit and any further changes in the political landscape elsewhere could derail this picture.

Reflecting this increased certainty in the commercial futures of the assets, owners are again exploring how they can maximise their position. While we do see a slim but steady pipeline of new greenfield PPP transactions in Belgium and the Netherlands, and expectations of new projects in France, Germany and Norway, much of the activity is now focusing on the secondary market.

In response to this, Steer Davies Gleave has been actively working on a number of projects, across all asset types, on both the buy and sell sides. These transactions have covered individual facilities as well as important portfolios of mature assets, with interest from many of the traditional investors as well as an increasing range of infrastructure funds.

The Spanish and Portuguese markets have been very active. Assets brought into operation during the boom years have been actively traded – with increased confidence in the traffic and revenue levels allowing both sellers and buyers to reach shared valuations of the worth of the assets. There have also been a number of transactions in France, Ireland and Italy, while in the UK a significant shareholding in the M25 concession was traded and the sole tolled motorway asset in the country, the M6 Toll, was being sold as the Review went to press.

While toll road and airport transactions remain at the core of the secondary transport market, we have also been supporting an increasing number of “core+” projects such as parking operations, service stations and station retail.

From our position in the market as traffic and technical advisors, we can see that the number of potential investors in the market keeps growing. We are seeing requests for support from many new, or newly-named, funds wishing to enter the market. While many of these are based in Europe, we have also met investors from across the world, from Canada, USA, Australia as well as the Gulf, South East Asia and China. Linklaters1 recently reported that, over the next ten years, global institutional investors will have funds of US$1 trillion at their disposal for investments in European transport and renewable infrastructure assets. Unless a sufficient flow of suitable deals come to market, this demand will almost certainly drive up prices for core assets and stimulate growing interest in the less conventional assets.

Of course, reflecting the steady but slow growth of the European PPP markets, traditional sponsors – such as contractors Vinci, ACS and Atlantia – are examining new greenfield projects across the world, seeking opportunities in the emerging brownfield markets in the Americas and elsewhere.

Steer Davies Gleave has the experience and the spread to support international investors across this complex global market. We have offices in a number of the countries with the most active PPP markets (in Europe, Canada, USA, Mexico, Colombia, Chile and Brazil) where we can provide a real ‘on the ground’ understanding of the assets and of the social, economic and regulatory environment in which they operate. We have just established an office in India, as that country’s toll road market opens up, and we have proven experience across many other important countries, including Australia and south east Asia.

Across all of our assignments, we can offer an international team drawn from across our different geographies. This gives to our clients a consistent service reflecting our international best practice and our understanding and relationships with our different clients. We think this represents a unique strength of Steer Davies Gleave’s success in building the reputation we have across the world of infrastructure finance.